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Johannesburg - The rand firmed against
the dollar on Monday as exporters took the chance to sell dollars after a sharp
fall for the local currency in the previous session due to ratings agency
Fitch’s downgrade of its outlook for the country.
The rand was trading at 8.0880 against the dollar at 15:15 GMT, 0.46% firmer than Friday’s New York close of 8.1250. It hit a one-week low of
8.2249 on Friday after Fitch’s statement.
“Dollar/rand has fallen through the first support level at 8.12 and
8.10, boosted by some export activity and as euro/dollar comes off intraday
lows,” said Anisha Arora, emerging market analyst at 4CAST.
The Fitch move, which came despite South Africa’s relatively low
levels of national debt, was a surprise to many and some analysts said it was
likely just about the generally nervous global environment and should not be
followed by an actual cut in its credit rating.
Bidvest Bank chief trader Ion de Vleeschauwer cautioned against
turning bullish on the rand, however, and said Monday’s moves could be
attributed to thin trading as U.S. markets were closed for a holiday.
“We must take these kind of moves with caution ... There’s still a
bit of fickleness in the market and we have those ratings downgrade in Europe
hanging over our heads,” he said.
Dollar/rand support at 8.02 will prove tough to break as investors
are wary of piling into risky assets after Standard and Poor’s downgraded nine
European countries over the weekend.
The rand’s attempt to break below 8.00 last week was a third one
since it hit a 2-1/2 year low in November.
Traders will also eye domestic inflation and retail sales data on
Wednesday and the Reserve Bank’s rate decision on Thursday for direction.
The market expects the bank to leave the repo rate unchanged at 5.5
percent and will focus on the post-meeting statement for clues on when it could
start to tighten policy.
If the bank raises its inflation forecasts markedly, the market is
likely to move its expectations for rate rises forward, putting pressure on bond
prices.
On Monday, bonds followed the rand firmer, with yields falling
across the board. One trader said Tuesday’s debt auction will likely attract
decent demand.
The yield on the 2015 bond fell 2.5 basis points to 6.77 percent
and that on the 2026 was down two basis points to 8.545 percent.
